Cutting Back, HCA Cancels Trip to MARS

The company gives up on an ambitious computer plan aimed at managing receivables.

To save money, the company is abandoning an expensive investment in MARS -- the so-called millennium accounts receivable system. The hospital chain now plans to utilize upgraded service centers, rather than the single Web-based system envisioned through MARS, to manage its accounts. The company will take a big pretax charge, totaling up to $130 million, to discontinue the MARS program this quarter. But it expects to recoup nearly twice that in savings over the next five years.

"We believe we have found a cheaper way to accomplish our goals," explained CEO Jack O. Bovender. "While no one likes to take a financial charge, sunk costs should never drive future decisions, and it is clear our alternative to MARS avoids substantial future costs and improves cash flows."

Bovender's salary will remain safe from such cutbacks, however. During HCA's annual meeting on Thursday, shareholders voted down a proposal that would have required Bovender to help find ways to trim his compensation. The vast majority -- or 95% -- of voters elected to keep Bovender's base salary at $1.5 million this year. He collected a similar amount, counting restricted stock and stock options, in 2002.

The directors are leaving HCA at a tough time for the hospital industry. Rising costs and weak admissions have cut into the sector's rapid growth. Big scandals -- particularly at Tenet ( HCA) -- have also weighed on the stocks.

Tenet has been accused of gaming Medicare and performing unnecessary surgeries on patients. But HCA has caught some heat as well. Just this week, a major health maintenance organization HMO in South Florida severed ties with the giant hospital chain. The HMO, Vista Healthplan, is suing HCA for alleged overbilling and fraud. Vista claims that HCA routinely submitted improper bills that have cost the HMO millions of extra dollars in the past two years alone. HCA has denied any wrongdoing.

Shares of HCA inched up 15 cents, or less than 1%, to $32.75 Thursday. The stock, suffering along with the rest of the sector, has lost 30% of its value over the past year.